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How Did Campbell Soup Company (CPB) Perform In Comparison to Hedge Fund Favorites in 2019?

Debasis Saha

Many investors, including Paul Tudor Jones or Stan Druckenmiller, have been saying before last year's Q4 market crash that the stock market is overvalued due to a low interest rate environment that leads to companies swapping their equity for debt and focusing mostly on short-term performance such as beating the quarterly earnings estimates. In the first half of 2019, most investors recovered all of their Q4 losses as sentiment shifted and optimism dominated the US China trade negotiations. Nevertheless, many of the stocks that delivered strong returns in the first half still sport strong fundamentals and their gains were more related to the general market sentiment rather than their individual performance and hedge funds kept their bullish stance. In this article we will find out how hedge fund sentiment to Campbell Soup Company (NYSE:CPB) changed recently.

Is Campbell Soup Company (NYSE:CPB) a buy right now? Prominent investors are turning bullish. The number of bullish hedge fund positions improved by 5 recently. Our calculations also showed that CPB isn't among the 30 most popular stocks among hedge funds (click for Q3 rankings and see the video at the end of this article for Q2 rankings).

Why do we pay any attention at all to hedge fund sentiment? Our research has shown that hedge funds' large-cap stock picks indeed failed to beat the market between 1999 and 2016. However, we were able to identify in advance a select group of hedge fund holdings that outperformed the Russell 2000 ETFs by 40 percentage points since May 2014 (see the details here). We were also able to identify in advance a select group of hedge fund holdings that'll significantly underperform the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 27.8% through November 21, 2019. That's why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to.

[caption id="attachment_25086" align="alignnone" width="600"] Dan Loeb of Third Point[/caption]

Dan Loeb THIRD POINT

We leave no stone unturned when looking for the next great investment idea. For example Discover is offering this insane cashback card, so we look into shorting the stock. One of the most bullish analysts in America just put his money where his mouth is. He says, "I'm investing more today than I did back in early 2009." So we check out his pitch. We read hedge fund investor letters and listen to stock pitches at hedge fund conferences. We even check out this option genius' weekly trade ideas. This December, we recommended Adams Energy as a one-way bet based on an under-the-radar fund manager's investor letter and the stock already gained 20 percent. With all of this in mind we're going to go over the latest hedge fund action encompassing Campbell Soup Company (NYSE:CPB).

Hedge fund activity in Campbell Soup Company (NYSE:CPB)

At the end of the third quarter, a total of 31 of the hedge funds tracked by Insider Monkey held long positions in this stock, a change of 19% from the second quarter of 2019. On the other hand, there were a total of 29 hedge funds with a bullish position in CPB a year ago. So, let's examine which hedge funds were among the top holders of the stock and which hedge funds were making big moves.

Is CPB A Good Stock To Buy?

Among these funds, Third Point held the most valuable stake in Campbell Soup Company (NYSE:CPB), which was worth $797.6 million at the end of the third quarter. On the second spot was Millennium Management which amassed $34.8 million worth of shares. GLG Partners, GAMCO Investors, and MFP Investors were also very fond of the stock, becoming one of the largest hedge fund holders of the company. In terms of the portfolio weights assigned to each position Third Point allocated the biggest weight to Campbell Soup Company (NYSE:CPB), around 9.48% of its 13F portfolio. MFP Investors is also relatively very bullish on the stock, designating 1.88 percent of its 13F equity portfolio to CPB.

As one would reasonably expect, specific money managers have been driving this bullishness. Hudson Bay Capital Management, managed by Sander Gerber, assembled the largest position in Campbell Soup Company (NYSE:CPB). Hudson Bay Capital Management had $7 million invested in the company at the end of the quarter. Lee Ainslie's Maverick Capital also initiated a $3.5 million position during the quarter. The other funds with brand new CPB positions are James Dondero's Highland Capital Management, Matthew Hulsizer's PEAK6 Capital Management, and Paul Tudor Jones's Tudor Investment Corp.

Let's now take a look at hedge fund activity in other stocks similar to Campbell Soup Company (NYSE:CPB). These stocks are Nomura Holdings, Inc. (NYSE:NMR), Korea Electric Power Corporation (NYSE:KEP), KB Financial Group, Inc. (NYSE:KB), and Freeport-McMoRan Inc. (NYSE:FCX). This group of stocks' market valuations match CPB's market valuation.

[table] Ticker, No of HFs with positions, Total Value of HF Positions (x1000), Change in HF Position NMR,5,24828,-2 KEP,6,43753,-1 KB,7,45753,-2 FCX,37,1012669,4 Average,13.75,281751,-0.25 [/table]

View table here if you experience formatting issues.

As you can see these stocks had an average of 13.75 hedge funds with bullish positions and the average amount invested in these stocks was $282 million. That figure was $973 million in CPB's case. Freeport-McMoRan Inc. (NYSE:FCX) is the most popular stock in this table. On the other hand Nomura Holdings, Inc. (NYSE:NMR) is the least popular one with only 5 bullish hedge fund positions. Campbell Soup Company (NYSE:CPB) is not the most popular stock in this group but hedge fund interest is still above average. Our calculations showed that top 20 most popular stocks among hedge funds returned 41.1% in 2019 through December 23rd and outperformed the S&P 500 ETF (SPY) by 10.1 percentage points. Hedge funds were also right about betting on CPB as the stock returned 54.2% in 2019 (through December 23rd) and outperformed the market. Hedge funds were rewarded for their relative bullishness. Video: Click the image to watch our video about the top 5 most popular hedge fund stocks.

5 Most Popular Stocks Among Hedge Funds

Disclosure: None. This article was originally published at Insider Monkey.

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